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The Global Garment Industry and the Informal Economy:Critical Issues For IRENE/CCC Discussion Paper The Global Garment Industry and the Informal Economy: Critical Issues for Labor Rights Advocates By Nina Ascoly, September 2004 IRENE/CCC Discussion Paper The Global Garment Industry and the Informal Economy: Critical Issues for Labor Rights Advocates By Nina Ascoly, September 2004 Aim of this paper This paper has been written as an input for the seminar “Campaigning strategies on informal labour in the global garment industry,” organized by the Clean Clothes Campaign (CCC), the International Restructuring Education Network Europe (IRENE), and the Evangelische Akademie Meissen, to be held at the Akademie September 23rd, 24th, and 25th, 2004.1 Because of the important (and growing) role of the informal economy in garment production, an increasing number of labor rights organizations and networks focusing on the garment industry aim to become more active on the issue of women workers in informal employment. This seminar is intended to bring together labor rights activists who focus on the garment industry with those doing research on and/or organizing in the industry’s informal economy. By cre- ating a space for the sharing of information and experiences, it is hoped that par- ticipants with more insight into the reality and needs of informal economy work- ers will better inform organizations seeking to formulate strategies for solidarity campaigns to support these workers’ struggles. The seminar is seen as an oppor- tunity to invigorate the dialogue among all these organizations on informal gar- ment economy issues and move closer toward developing a joint agenda for action. Optimally, the proceedings should generate concrete goals and strategies for labor rights campaigns seeking to take action to support women working in the garment’s informal economy. The informal economy is a broad term that encompasses many diverse forms of work and workers. Sometimes there is unclarity surrounding the terminology that is used to describe the informal economy and the different problems, needs, and experiences of these workers employed in varying situations. Since seminar par- ticipants will be approaching these issues from different perspectives, this brief 1 A first draft of this paper was circulated to the seminar’s inter- national steering committee. The author is grateful for feedback received from various members of this group. IRENE/CCC Discussion Paper Page 2 overview is intended to provide some general background information on the infor- mal economy and the garment industry and highlight some of the key discussions currently going on in relation to informal economy workers’ rights that are expect- ed to be taken up during the seminar. 1. What is the informal economy? The term “informal economy,” replacing the previously used term “informal sector,” is used to refer to workers and companies that are not recognized or protected under legal and regulatory frameworks and are characterized by a high degree of vulnerability (ILO, 2002).2 Informal economy workers often have no wage agree- ments, earn little (not a living wage and often below legal minimum wage stan- dards), are not paid on time, have no employment contracts, no regular working hours, are not covered by non-wage benefits (such as health insurance or unem- ployment benefits), and are not a priority for most governmental, political, or labor organizations. The term informal sector, first put into use by the ILO in the early 1970s and still commonly used, is now seen as misleading because it masks the diversity and complexity of these work arrangements and processes, and seems to imply (incor- rectly) that such processes are limited to one sector or industry. The concept of a sector seems to suggest that there is a dichotomy between “formal” and “infor- mal” while in reality, as the ILO notes (2002: 8), a continuum exists, with linkages between formal and informal via subcontracting arrangements. It is also possible that formal employment situations can include workers operating in informal con- ditions (ex. workers in a formal workplace that have no contract). As the Committee for Asian Women observes, “in more and more situations, workers in so-called informal employment work side by side under the same roof as workers in formal employment” (CAW, 2001a: 2). The terms informal employment, unregulated, unprotected, excluded, atypical, and precarious employment are also often used interchangeably to describe the situation of workers in the informal economy. Each term brings with it slightly dif- ferent meanings, and usually the choice for one or the other is political. 2 The ILO views the informal economy as comprising margin- alized economic units and workers who are characterized by serious deficits in terms of income security, job security, work security, representation security, skills reproduction security (2002: 7-8). Reducing these deficits in the informal economy, they believe, will promote the transition to recognized, pro- tected, legal – and, therefore, “formal” – activities and ensure decent work. See the full ILO report for more elaboration on terms. IRENE/CCC Discussion Paper Page 3 2. The informal economy is global and is growing The informal economy is growing and is not confined to certain regions or cate- gories of countries. “…The informal economy has been growing rapidly in almost every corner of the globe, including industrialized countries,” reports the ILO (2002: 5). “The bulk of new employment in recent years, particularly in developing and transition coun- tries, has been in the informal economy.” However, precise data on employment in the informal economy is difficult to come by. Some countries define informal employment differently; as a result the data collected only reflects a partial picture of the scope of activity really taking place in the informal economy. For example, much of the data collected at the national level only refers to those whose main job or only job is in the informal economy, leaving out those who have secondary jobs in the informal economy (a number thought to be quite large in some countries). Sources of data also vary from coun- try to country, and in many countries data on informal employment only covers urban areas, or capital cities (Hussmanns & Du Jeu, 2002). The International Confederation of Free Trade Unions (ICFTU) reports that “25% of the world's working population are active in the informal economy and generate 35% of global GDP” (2004:1). The World Bank's World Development Report of 2001 lists the informal sector share of non-agricultural employment at 57% in Latin America/the Caribbean, 78% in Africa, and 45-85% in Asia (Charmes cited in WIEGO, 2004b). But according to Women in Informal Employment Globalizing and Organizing (WIEGO), an organization that has done extensive work on the issue of informal economy data collection, official statistics probably underestimate the size and economic contribution of the informal economy (2004b).3 To get a sense of the scale of the informal economy consider that the number of home-based workers alone, most of whom are part of the informal economy, is estimated to be 300 million worldwide, according to HomeNet, the international solidarity network representing, organizing, and supporting home-based workers around the world. But there are many other types of workers and work arrange- ments in the informal economy. 3 In 1997, The International Expert Group on Informal Sector Statistics (known as the Delhi Group) requested that WIEGO write a series of papers recommending improved concepts, measures, and methods for data collection on the informal sec- tor. This project generated five papers and several recommenda- tions, a summary of which can be found at the WIEGO website < http://www.wiego.org/textonly/areas5.shtml >. IRENE/CCC Discussion Paper Page 4 3. The role of the informal economy in the garment industry The trend toward informalization is also seen to be on the rise in the garment industry. Manufacture of garments for domestic markets and those made for export can involve production in the informal economy. As those producing for the global market seek to remain competitive, informaliza- tion is a tool they use to cut costs. Globally, there is a trend toward reorganizing garment production to be increasingly flexibilized and decentralized, through diverse forms of subcontracting. This might appear to be at odds with the current trend toward consolidation in the garment industry, with brand name companies or retailers sourcing in fewer countries through fewer companies.4 However, orders are often fulfilled through subcontracting arrangements that make use of the informal economy. It is useful to think of garment production orders being funneled through an hourglass – a great many orders are sent to an increasingly concentrated number of agents or multinational production companies; they in turn distribute these orders to a great number of suppliers, who in turn distribute work to what amounts to a large network of subcontractors. Many of these sub- contractors operate in the informal economy, also in a number of different arrangements. 4. Different forms of informal work In the garment industry informal economy workers can include home-based workers, whose employment relationship with an employer is not recognized or protected; those who run micro-enterprises, who face various barriers and con- straints to setting up and operating formal enterprises; and those who work for them, as well as other arrangements. Women who make garments for local mar- kets might have no employers – they get their own inputs, produce the garments, and find markets for their goods. 4 In June 2003, several of the major global garment producers including Hugo Boss, Gap, JC Penney, Liz Claiborne, and Wal- Mart, gathered together at the IAF World Apparel Convention, reported that while they used to source from 50 or more nations, that number is now shrinking. Now they source from fewer nations (approximately 30 to 40, though they predict that this number may soon be as low as 10) and from fewer and bigger suppliers (just-style.com (2003) "World Apparel Convention focuses on quota freedom," July 8).
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